The Department for Work & Pensions should have increased its focus on Housing Benefit fraud and error sooner, according to a report from the National Audit Office. The total level of benefit overpayment due to fraud and error has increased to an estimated £1.4 billion in 2013-14 (5.8% of spending on this benefit) from £980 million in 2010-11 (4.6%).
In 2013-14, the DWP spent £23.9 billion on this means-tested benefit to help the 5 million households on low income to pay rent. Claimant error is the main cause of overpayments (£900 million in 2013-14) while the estimated rate of fraud has remained the same at 1.4% (£340 million).
The DWP accepts that it is ultimately responsible for Housing Benefit fraud and error, and bears most of the financial risk if overpayments are not prevented or identified. The report considers that the DWP has not established sufficiently clearly how the responsibilities for tackling fraud and error are divided between it and local authorities.
According to today’s report, the DWP has relied too heavily on the incentives in the subsidy process (when local authorities reclaim payments) and the valuable, but limited, data sharing and matching it provides. As a result, the Department’s management of Housing Benefit fraud and error has not provided value for money over the last few years.
Today’s report notes that the funding to support local authorities’ administration of claims related to Housing Benefit fell by 17% between 2010-11 and 2013-14. At the same time, the number of people claiming Housing Benefit increased by 5%.
The DWP is increasing its focus on tackling Housing Benefit fraud and error. As it finalizes its plans, it will need to show it has addressed certain issues: including targeting interventions more on major areas of loss and exploiting data to identify riskier claims and strengthen decision-making.
The DWP is making major changes to the administration of Housing Benefit, including the introduction of a single fraud investigation service, and intends in the longer term to centralize the administration of working age Housing Benefit claims as part of Universal Credit. However, what effects the changes might have, and when, remain uncertain.
Among the NAO’s recommendations is that the Department should set out clearer responsibilities for reducing fraud and error.
“Housing Benefit is a difficult benefit to administer and, against a background of unclear responsibilities and limited investment, it is unsurprising that total overpayments have increased. The Department for Work & Pensions is facing an escalating problem. The DWP has recognized the need to do more and has been developing a new strategy. As these initiatives are in the early stages, it is too early to know whether they are working. However, the Department will need to show that it is tackling problems with local authority incentives and targeting major areas of loss.”
Amyas Morse, head of the National Audit Office, 17 October 2014
Notes for Editors
Total Housing Benefit payments, 2013 -14
The Department’s preliminary central estimate of Housing Benefit overpayments in 2013-14
5.8 per cent
Estimated overpayments as a proportion of Housing benefit spending, 2013-14 (range: 4.7% to 7.0%)
3.5 per cent
Estimate of net overpayments as local authorities recovered approximately 40% of overpayments by claimants in 2013-14
Overpayments due to claimant error, 3.8 per cent of benefit spending (range: between 2.8% and 4.6%). The central estimate was 2.8 per cent in 2010-11
Overpayments due to fraud, 1.4 per cent of benefit spending (range: between 0.8% and 2.1%), the same level as 2010-11
Overpayments due to official error, 0.6 per cent of benefit spending (range: between 0.3% and 1.1%) The central estimate was 0.4 per cent in 2010-11
2.8 per cent
Level of overpayment identified in local authority provisional subsidy returns in 2013-14 (as a proportion of Housing Benefit spending)
Funding to local authorities for administering Housing Benefit in 2013-14; around half of total administrative costs
1.7 per cent
Target for total benefit overpayments across the Department by March 2015. Preliminary estimates for 2013-14 showed total overpayments were £3.3billion, 2.0% of benefit spending (range: between 1.7% and 2.4%)
Note that the DWP’s estimates provide the best available indicator of the current levels of fraud and error. The NAO recognizes in the report that central estimates are subject to confidence intervals. Its view is that the central estimate gives enough cause for concern about the level and change in fraud and error overpayments, and should be the basis for decision-making by the Department. Appendix 3 sets out the Department’s approach to measurement and discusses the significance of recent increases.
The Department for Work & Pensions spent £23.9 billion on Housing Benefit in 2013-14, 15 per cent of its total benefit spending. Eligibility for Housing Benefit depends on several factors including: income and capital; household size, ages and circumstances; and rent levels. Error arises when claimants provide or staff use incorrect information about eligibility to calculate the level of the Housing Benefit award. Fraud occurs when claimants deliberately misrepresent their circumstances to maximize their benefit entitlement.
The Department and local authorities manage Housing Benefit. The Department sets policy, entitlement rules and shares data and guidance with local authorities. Local authorities undertake the day to day administration of Housing Benefit and pay claimants. Local authorities reclaim payments from the Department (referred to as the 'subsidy'). The Department also provides administrative funding each year towards the cost of administering claims. In 2013-14, it paid local authorities £466 million.
Press notices and reports are available from the date of publication on the NAO website, which is at www.nao.org.uk. Hard copies can be obtained by using the relevant links on our website.
The National Audit Office scrutinises public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Amyas Morse, is an Officer of the House of Commons and leads the NAO, which employs some 820 employees. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund have used their resources efficiently, effectively, and with economy. Our studies evaluate the value for money of public spending, nationally and locally. Our recommendations and reports on good practice help government improve public services, and our work led to audited savings of £1.1 billion in 2013.
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